(Bloomberg) -- A long-awaited program to allow investments for private wealth between Hong Kong and mega-cities in China’s southern region will open for cross-border flows as soon as next month.
Wealth Management Connect, which has been estimated to generate almost $500 million in annual fees for banks, will come into operation in October and November, said Edmond Lau, Hong Kong Monetary Authority’s deputy chief executive officer, at a ceremony on Friday.
HSBC Holdings Plc, Standard Chartered Plc and Citigroup Inc. have been beefing up their presence in anticipation of the plan, one of the building blocks in integrating the Greater Bay Area, a region of 70 million people encompassing cities such as Guangzhou and Shenzhen. Hong Kong’s government has embraced closer ties with China since unrest hit the city in 2019.
“Hong Kong’s asset management industry is excited at the opening of what is effectively a brand-new market,” said Alexa Lam, chief executive officer, Asia-Pacific, at ICI Global, an association representing regulated funds with $40.5 trillion in assets.
The area has total gross domestic product of about $1.7 trillion, an economy similar in size to Canada, according to consulting firm Bain & Co. A survey conducted by HSBC and the Nielson Co. (Hong Kong) found more than 80% of mainland investors in the area plan to invest through wealth management connect.
The link will open a northbound channel for Hong Kong and Macau residents to invest in onshore financial products and a southbound channel for eligible mainland residents to invest offshore. The program will free up some capital controls and allow mainland investors to move money out of China in a closed loop system with an individual quota of 1 million yuan ($155,000) and a cap of 150 billion yuan.
Mainland residents will need at least 2 years investment experience and at least 1 million yuan in net household financial assets in the most recent three months to be qualified.
At the initial stage, mainland Chinese investors will be limited to “low” and “medium” risk and “non-complex” Hong Kong products such as deposits and bonds, as well as Hong Kong-domiciled funds, including equities, authorized by the regulator.
“We are in place to deliver the best value for our clients in the region, including to offer GBA clients a broader range of investment opportunities,” said Lawrence Lam, head of consumer banking for Hong Kong at Citigroup. “To support client-led wealth growth in Hong Kong, we plan to hire over 1,000 professionals across the wealth franchise by 2025.”
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